In re Hertzel, BAP No. 04-8083.

• Decision Date: 30 August 2005
• Docket Number: Adversary No. 03-6135.,Bankruptcy No. 03-63933.,BAP No. 04-8083.
• Citation: 329 B.R. 221
• Parties: In re Lisa Marie HERTZEL, Debtor. Lisa Marie Hertzel, Plaintiff-Appellee, v. Educational Credit Management Corporation, Defendant-Appellant.
• Court: U.S. Bankruptcy Appellate Panel, Sixth Circuit

329 B.R. 221

In re Lisa Marie HERTZEL, Debtor Lisa Marie Hertzel, Plaintiff-Appellee, v. Educational Credit Management Corporation, Defendant-Appellant.

BAP No. 04-8083.

Bankruptcy No. 03-63933.

Adversary No. 03-6135.

United States Bankruptcy Appellate Panel for the Sixth Circuit.

Submitted: May 4, 2005.

Decided and Filed: August 30, 2005.

Appeal from the United States Bankruptcy Court for the Northern District of Ohio.

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On Brief: Frederick S. Coombs III, Harrington, Hoppe & Mitchell, Youngstown, Ohio, for Appellee. Lisa Marie Hertzel, Massillon, Ohio, pro se.

Before: AUG, LATTA, and PARSONS, Bankruptcy Appellate Panel Judges.

OPINION

AUG, Chief Judge.

Educational Credit Management Corporation ("ECMC") appeals the order of the bankruptcy court granting the Debtor, Lisa Marie Hertzel, a discharge of her student loans on the basis that excepting the loans from discharge would impose an undue hardship on the Debtor pursuant to 11 U.S.C. § 523(a)(8). For the reasons that follow, the decision of the bankruptcy court is AFFIRMED.

I. ISSUES ON APPEAL

1. Whether the bankruptcy court's determination that excepting the Debtor's student loans from discharge will impose an undue hardship on the Debtor, was clearly erroneous.

2. Whether under the second prong of the Brunner test, the bankruptcy court may take judicial notice of the long-term effect or likely prognosis of a debtor's well-known medical condition.

II. JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel of the Sixth Circuit ("BAP") has jurisdiction to hear and decide this appeal. The United States District Court for the Northern District of Ohio has authorized appeals to the BAP. A "final order" of a bankruptcy court may be appealed by right under 28 U.S.C. § 158(a)(1). For purposes of an appeal, an order is final if it "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497, 103 L.Ed.2d 879 (1989) (citations omitted). A bankruptcy court's judgment determining dischargeability is a final and appealable order. Cundiff v. Cundiff (In re Cundiff), 227 B.R. 476, 477 (6th Cir. BAP 1998) (citations omitted).

The appellate court reviews conclusions of law de novo. "`De novo review requires the Panel to review questions of law independent of the bankruptcy court's determination.'" Bailey v. Bailey (In re Bailey), 254 B.R. 901, 903 (6th Cir. BAP 2000) (quoting First Union Mortgage Corp. v. Eubanks (In re Eubanks), 219 B.R. 468, 469 (6th Cir. BAP 1998) (omitting citations)). "Determinations of dischargeability under 11 U.S.C. § 523 are conclusions of law reviewed de novo." In re Bailey, 254 B.R. at 903, (citing Hart v. Molino (In re Molino), 225 B.R. 904, 906 (6th Cir. BAP 1998)); see also Sorah v. Sorah (In re Sorah), 163 F.3d 397, 400 (6th Cir.1998) (holding that "the interpretation of § 523 is a legal issue that we review de novo"). But the BAP must "`affirm the underlying factual determinations unless they are clearly erroneous.'" In re Bailey, 254 B.R. at 903 (quoting In re Molino, 225 B.R. at 906). A factual determination is clearly erroneous "when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." In re Bailey, 254 B.R. at 903 (internal quotations and citations omitted).

III. FACTS

The Debtor, a 35-year-old single woman suffering from multiple sclerosis, filed her chapter 7 petition on July 24, 2003. On November 17, 2003, she filed a complaint to determine the dischargeability of her student loans. The trial on the Debtor's complaint was held on May 24, 2004.

Between June 1994 and September 1996, the Debtor incurred six student loans which enabled her to obtain a Master of Education in Community Counseling in 1997 from Kent State University.¹ As of December 18, 2003, the total amount owed on the loans, including interest and costs, was $66,915.47.²

Shortly after obtaining her master's degree, the Debtor was diagnosed with depression, anxiety, and obsessive-compulsive disorder. In May 2001, she began experiencing symptoms of multiple sclerosis, which was eventually diagnosed in December 2002. According to a letter³ from her doctor submitted at trial, the debtor's "diagnosis is relapsing/remitting multiple sclerosis, depression, and history of visual disturbances.... She has some blurring in her right eye as well as a weakness in her right hand and leg. Due to her condition she needs to have ongoing care and is in need of Copaxone." (Joint Appendix at 13 (hereinafter, the Joint Appendix will be referred to as "J.A.").) The debtor testified at trial that she was currently on Copaxone, which with insurance coverage costs her $20 per month, and that the drug had been helpful in alleviating some of her symptoms. Notwithstanding the medication, the Debtor continues to have "good days and bad days with [her] eyes" (J.A. at 52) including visual difficulties and pain in her right eye and sinuses, and she has problems with her memory and concentration.

The Debtor's career goal when she went back to school to obtain her master's degree was to be a private counselor or therapist working with children and adolescents. In that career, the Debtor anticipated earning $45,000 to $50,000 per year. However, to take full benefit of her education, the Debtor needed to take and pass her Licensed Professional Counselor ("LPC") exam. She apparently took the test one time and did not pass. The Debtor testified that over the last couple of years she had attempted to study the materials in order to retake the test, but had been unable to retain the data. The Debtor testified that even if she obtained a job in her ideal position as a counselor, she would not be able to do the work because of the memory and concentration problems caused by the MS.

The Debtor's employment history since she obtained her master's degree is as follows:

The Debtor was first employed in a full-time position with the Department of Human Services in their Department of Reunification where the Debtor worked with children with severe mental disabilities and mental health issues. The position was grant-funded and lasted only about a year or until May 1998.

The Debtor was unemployed from May 1998 until October 1998 when she obtained a position through the Ohio Department of Youth Services, Indian River, at a maximum security prison for teenage boys in Massillon, Ohio. The Debtor held this position for approximately ten and a half months (October 1998 until approximately August 1999) until she was involved in a car accident in which she suffered several broken bones. Because she was going to require at least three months to recover from her injuries and she did not yet qualify for the Family Medical Leave Act, her employer would not hold her job position open for her during her recovery period and she eventually lost her job.

The Debtor remained unemployed until she obtained a temporary position with the Census Bureau from April 2000 though September 2000. After that time period, she was again unemployed. The Debtor testified that during the time periods she was unemployed she sought employment and went on many interviews but that no one would hire her because she had not passed the LPC exam. The Debtor lived on various forms of public assistance until she obtained a part-time job in September 2002 working at the Massillon Shelter for women and children who had been victims of domestic violence. In March 2003, the Debtor was offered and she accepted a full-time position at the shelter even though it had been recommended that she reduce her work hours due to her MS. In early 2004, the debtor broke her ankle, necessitating surgery and extended medical leave, but was back in full-time employment at the shelter at the time of the trial on May 24, 2004. However, the Debtor did testify that the shelter is funded by grants and that there had been some discussion about shutting down the shelter.

With respect to her income and expenses, the Debtor testified that Schedules I and J accurately reflected her income and expenses at the time of trial. Schedule I shows that the Debtor has a monthly gross income of $1,607.16 and that she nets $1,274.62 after taxes of $267.70 and health insurance of $64.84. The Debtor's income as shown on her 2003 tax return is $22,342.00. The Debtor's 2003 W-2 statement from the shelter reflects income of $17,867.48. The Debtor testified that in 2003 she also earned approximately $4,000.00 from a job as a loan closer. She further testified that she was not earning as much income from the loan closing job as she did previously since the company had hired a full-time loan closer and now only needed to use the Debtor's services on an emergency basis. On March 18, 2003, the Debtor received a letter from the shelter indicating that her annual salary would be $19,760.00 or $1,646.66 per month prior to taxes. That figure is substantially consistent with the gross income figure of $1,607.16 reflected on the Debtor's Schedule I. Schedule J reflects monthly expenses of $1,404.00 as follows:

                    Rent                               $ 450.00
                    Electricity and heating               30.00
                    Telephone                             50.00
                    Food                                 150.00
                    Laundry and dry cleaning              10.00
                    Medical and dental expenses          200.00
                    Transportation                       100.00
                    Health insurance                      65.00
                    Auto insurance                       134.00
                    Cigarette and internet connection    115.00
                                                       _________
                    Total                              $1,404.00
                                                       =========
                

With respect to payment of her student loans, the Debtor obtained deferments...